The University of Michigan’s consumer sentiment index for May was down 10% from a month ago.
Consumer sentiment in May fell after three consecutive months of little movement, according to the University of Michigan’s consumer sentiment index.
The final reading for May of 69.1 was a slight improvement from two weeks ago when the preliminary estimate saw the index drop 10 points to its lowest level in six months as consumers soured on inflation, high interest rates and concerns about the labor market.
Expectations of where inflation may be a year from now rose to 3.3% from 3.2% in April.
“Consumers expressed particular concern over labor markets, they expect unemployment rates to rise and income growth to slow,” said survey director Joanne Hsu. “The prospect of continued high interest rates also weighed down consumer views.
Consumer sentiment retreated about 10% in May and the 8.1 point decline was deemed ‘statistically significant.’
Minutes of the Federal Reserve meeting in early May released Wednesday showed officials concerned about the persistence of inflation and even wondering if interest rates should be higher. Markets are now pricing in no cut in interest rates before September.
Last week’s release of the consumer price index for April did show inflation moderating a little, with grocery prices coming down, but the annual rate of 3.4% is still well above the Fed’s 2% target.
Experts also say that consumers are most upset about the cumulative effect of inflation dating back to late 2021 as the economy recovered from the shocks of the pandemic. Overall prices are up about 20% since then, although many items have seen increases twice that.
Two reports this week on the housing sector showed that sales of both existing and new homes fell in April, as high prices and elevated interest rates put a crimp on the sector.
The labor market appears to be slowing, with 175,000 jobs created in April. But whether that continues or job supply and demand comes closer to a normal balance remains to be seen.
The sour mood of consumers could be a factor in the presidential election as analysts say people tend to lock in their thinking about the economy and who they might vote for about six months before the November election date. Various polls show voters blame President Joe Biden for the inflation that has dominated economic news over the past three years.
Source: usnews.com
